Asia PX supply to surge in H2 on new capacity start-ups

SINGAPORE (ICIS)–The paraxylene (PX) market in Asia is expected to see a surge in new supply in the second half of the year, as new capacities are due to come on stream.

A female worker at a textile factory in Huaibei, China. Textiles are a major downstream industry for paraxylene (PX). (Source: Imagine China/Shutterstock)

Spot PX prices started the year on a strong note, spurred by strong buying activity due to a heavy turnaround schedule in the second quarter.

Buyers had been stocking up on inventories on expectations of tightening supply.

But supply has lengthened following the earlier-than-expected start-up of Hengli Petrochemical’s 4.5m tonne/year PX facility, exerting a downward pressure on prices.

On 17 June, spot PX prices were assessed at $814-816/tonne CFR (cost & freight) China/Taiwan, off the 2019 peak of $1,131-1,133/tonne CFR China/Taiwan hit in end-March, according to ICIS data.

Major settlements for the monthly PX Asian Contract Price (ACP) so far this year were only recorded in February and March at $1,050/tonne and $1,080/tonne, respectively.

The price gap between PX and upstream naphtha rose to its highest so far this year in early February at around $614.25/tonne, well above what the market deems as the healthy level of $350/tonne.

Market uncertainties generated by the ongoing US-China trade war are compounding concerns over the expected lengthening of supply.

NEW SUPPLY CONCENTRATED IN CHINA
Four out of the five new PX projects due to come on stream this year in Asia are situated in China.

Hengli Petrochemical’s massive 4.5m tonne/year plant in Dalian started up early in the year; while Sinopec Petrochemical’s new 1m tonne/year unit in Hainan and Sinochem Hongrun’s 800,000 tonne/year facility are expected to begin production in the third quarter.

Zhejiang Petrochemical’s new 4m tonne/year PX facility in Zhoushan is scheduled to start up toward the end of the year.

Once smooth commercial operations are achieved at these units, China’s reliance on imports will likely decline, as the increase in supply will outpace growth in downstream demand.

In 2018, China imported a total of 15.8m tonnes of PX, more than 50% of which came from South Korea and Japan.

Its annual PX consumption stood at around 26.4m tonnes last year, and typically grows at 6.0%. For 2019, this translates to an additional requirement of 1.5m tonnes of PX.

Due to complexity of the new facilities, however, smooth commercial operations would take some time to achieve.

Both Hengli Petrochemical, and Zhejiang Petrochemical have refineries that are fully integrated into PX production, with a maximum chemical yield facility configuration.

Any delay in start-up plans of these huge capacities could be a boon to the PX market in the near term.

DEMAND STEADY; US-CHINA TRADE WAR LIMITS GROWTH
Downstream demand is steady in the key China market despite scheduled start-ups of major downstream purified terephthalic acid (PTA) facilities, as growth is being hampered by uncertainties amid the ongoing trade war between the world’s two biggest economies.

Trial runs at Sichuan Shengda’s new downstream 1m tonne/year purified terephthalic acid (PTA) plant in Nanchong began on 22 May; while Xinfengming’s new 2.2m tonne/year unit is due to come on stream in the fourth quarter.

Hengli Petrochemical is also expected to start up its new 2.5m tonne/year PTA unit toward the end of the year.

PTA producers in China have been keeping their feedstock PX inventories low amid the ongoing US-China trade war, wary of possible heavy losses.

Buying patterns for PX were largely on a need-to basis, with limited appetite for inventory building because of an unclear market outlook.

The spread between PX and downstream PTA has been healthy, signifying positive margins, thus keeping demand for PX steady.

Focus article by Samuel Wong

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